Castle Brands Announces Fourth Quarter and Fiscal 2012 Results

NEW YORK--(BUSINESS WIRE)--
Castle Brands Inc. (NYSE MKT: ROX), a developer and international
marketer of premium and super-premium branded spirits and wine, today
reported financial results for the quarter and year ended March 31, 2012.

Operating highlights for the fiscal year ended March 31, 2012:

Net sales increased 10.9% to $35.5 million for the year ended March
31, 2012, as compared to $32.0 million for the comparable prior-year
period

U.S. beverage alcohol case volume increased 10% to 272,610 cases for
the year ended March 31, 2012, as compared to 247,610 cases for the
comparable prior-year period, primarily due to organic growth

Rum sales increased 18.7% to $12.8 million for the year ended March
31, 2012, as compared to $10.8 million for the comparable prior-year
period; due to the continued growth of Gosling's rums

Loss from operations improved 28.6% to ($3.9) million for the year
ended March 31, 2012 from ($5.4) million for the comparable prior-year
period

EBITDA, as adjusted, improved 40% to a loss of ($2.4) million for the
year ended March 31, 2012, as compared to a loss of ($4.0) million for
the comparable prior-year period, primarily as a result of increased
gross margin and lower selling expense.

"We are excited by the traction many of our brands are gaining in the
U.S. market as a result of our targeted marketing efforts, especially
Jefferson's bourbons and Gosling's rums. We have focused our efforts on
these more profitable brands in 2012, which has allowed us to increase
our gross margins and significantly improve our operating loss in 2012,"
stated Richard J. Lampen, President and Chief Executive Officer of
Castle Brands. "We are pleased to have entered into a term sheet to
increase availability under our working capital facility from $5 million
to $7 million, which will provide us with additional working capital as
we move toward profitability. Castle Brands expects continued increased
U.S. and international case sales through organic growth, product line
extensions, potential acquisitions and distribution agreements. We
intend to support this growth with our existing infrastructure, and
anticipate our general and administrative expenses to remain relatively
flat during this period."

"The growth in U.S. sales reflects the momentum of our Gosling's rums,
Jefferson's bourbons, Pallini Limoncello, Knappogue and Clontarf Irish
whiskeys and Brady's Irish cream," stated John Glover, Chief Operating
Officer of Castle Brands. "Initial sales of the Gosling's Dark ‘n Stormy®
ready-to-drink cocktail, which was launched in February 2012, have been
encouraging. We expect sales of this great new product to trend upwards
in the summer months. We also expect it to expand the appeal of
Gosling's to trendsetting consumers."

In the fourth quarter of fiscal 2012, the Company had net sales of $10.0
million, an 11.7% increase from net sales of $8.9 million in the
comparable prior-year period. Loss from operations improved by 14.5% to
$1.0 million in the fourth quarter of fiscal 2012, from $1.1 million for
the prior-year period. Including the $0.2 million non-cash dividend
accrued under the terms of the Company's Series A Preferred Stock, the
Company had a net loss attributable to common shareholders of $1.5
million, or $(0.01) per basic and diluted share, in the fourth quarter
of fiscal 2012, unchanged from the prior-year period.

EBITDA, as adjusted, for the fourth quarter of fiscal 2012 improved
51.7% to a loss of $0.3 million, compared to a loss of $0.7 million for
the prior-year period.

Net sales were $35.5 million for the year ended March 31, 2012, a 10.9%
increase as compared to $32.0 million for the prior-year period. Loss
from operations was ($3.9) million for the year ended March 31, 2012, an
improvement of 28.6% from a loss of ($5.4) million for the prior-year
period. Including the $0.7 million non-cash dividend accrued under the
terms of the Series A Preferred Stock, the Company had a net loss
attributable to common shareholders of ($5.9) million, or $(0.06) per
basic and diluted share, for the year ended March 31, 2012, a 5.7%
improvement compared to a net loss attributable to common shareholders
of ($6.3) million or $(0.06) per basic and diluted share, in the
comparable prior-year period.

EBITDA, as adjusted, for the year ended March 31, 2012 improved 40%to a
loss of ($2.4) million, compared to a loss of ($4.1) million for the
prior-year period.

Non-GAAP Financial Measures

Within the information above, Castle Brands provides information
regarding EBITDA, as adjusted, which is not a recognized term under GAAP
(Generally Accepted Accounting Principles) and does not purport to be an
alternative to operating income (loss) or net income (loss) as a measure
of operating performance. Earnings before interest, taxes, depreciation
and amortization, or EBITDA, adjusted for allowances for doubtful
accounts and obsolete inventory, stock-based compensation expense,
severance expense, other income and expense, loss from equity investment
in non-consolidated affiliate, foreign exchange loss, net change in fair
value of warrant liability, net income attributable to noncontrolling
interests and dividend to preferred shareholders is a key metric the
Company uses in evaluating its financial performance on a consistent
basis across various periods. EBITDA is considered a non-GAAP financial
measure as defined by Regulation G promulgated by the SEC under the
Securities Act of 1933, as amended. Due to the significance of non-cash
and non-recurring items, EBITDA, as adjusted, enables the Company's
Board of Directors and management to monitor and evaluate the business
on a consistent basis. The Company uses EBITDA, as adjusted, as a
primary measure, among others, to analyze and evaluate financial and
strategic planning decisions regarding future allocation of capital
resources. The Company believes that EBITDA, as adjusted, eliminates
items that are not indicative of its core operating performance or are
based on management's estimates, such as severance expense, are due to
changes in valuation, such as the effects of changes in foreign exchange
or fair value of warrant liability, or do not involve a cash outlay,
such as stock-based compensation expense. EBITDA, as adjusted, should be
considered in addition to, rather than as a substitute for, income from
operations, net income and cash flows from operating activities.
Reconciliation of net loss to EBITDA, as adjusted, is presented below.

This press release includes statements of our expectations,
intentions, plans and beliefs that constitute "forward looking
statements" within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934 and are
intended to come within the safe harbor protection provided by those
sections. These statements, which involve risks and uncertainties,
related to the discussion of our business strategies and our
expectations concerning future operations, margins, sales, new products
and brands, potential joint ventures, potential acquisitions, expenses,
profitability, liquidity and capital resources and to analyses and other
information that are based on forecasts of future results and estimates
of amounts not yet determinable. You can identify these and other
forward-looking statements by the use of such words as "may," "will,"
"should," "expects," "intends," "plans," "anticipates," "believes,"
"thinks," "estimates," "seeks," "expects," "predicts," "could,"
"projects," "potential" and other similar terms and phrases, including
references to assumptions. These forward looking statements are made
based on expectations and beliefs concerning future events affecting us
and are subject to uncertainties, risks and factors relating to our
operations and business environments, all of which are difficult to
predict and many of which are beyond our control, that could cause our
actual results to differ materially from those matters expressed or
implied by these forward looking statements. These risks include our
history of losses and expectation of further losses, our ability to
expand our operations in both new and existing markets, our ability to
develop or acquire new brands, our relationships with distributors, the
success of our marketing activities and our cost reduction efforts, the
effect of competition in our industry and economic and political
conditions generally, including the current recessionary economic
environment and concurrent market instability. More information about
these and other factors are described under the caption "Risk Factors"
in Castle Brands' Annual Report on Form 10-K for the year ended March
31, 2012 and other reports we file with the Securities and Exchange
Commission.When considering these forward looking statements,
you should keep in mind the cautionary statements in this press release
and the reports we file with the Securities and Exchange Commission. New
risks and uncertainties arise from time to time, and we cannot predict
those events or how they may affect us. We assume no obligation to
update any forward looking statements after the date of this press
release as a result of new information, future events or developments,
except as required by the federal securities laws.

CASTLE BRANDS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

Three months ended March 31,

(unaudited)

Twelve months ended March 31,

2012

2011

2012

2011

Sales, net*

$

9,993,073

$

8,948,453

$

35,494,615

$

31,997,276

Cost of sales*

6,441,974

5,816,581

22,694,297

20,890,019

Provision for obsolete inventory

275,000

(14,610

)

275,000

(39,199

)

Gross profit

3,276,099

3,146,482

12,525,318

11,146,456

Selling expense

2,744,126

2,793,306

10,502,478

10,756,673

General and administrative expense

1,252,066

1,241,373

4,985,566

4,897,210

Depreciation and amortization

231,641

224,706

914,361

919,751

Loss from operations

(951,734

)

(1,112,903

)

(3,877,087

)

(5,427,178

)

Other income

—

622

—

1,579

Other expense

—

—

—

(300

)

Loss from equity investment in non-consolidated affiliate

(12,361

)

(20,041

)

(28,923

)

(2,827

)

Foreign exchange loss

(208,762

)

(135,761

)

(722,253

)

(308,585

)

Interest expense, net

(103,801

)

(160,538

)

(589,781

)

(405,384

)

Net change in fair value of warrant liability

16,154

—

109,767

—

Income tax benefit

37,038

37,038

148,152

148,152

Net loss

(1,223,466

)

(1,391,583

)

(4,960,125

)

(5,994,543

)

Net income attributable to noncontrolling interests

(86,915

)

(71,608

)

(272,200

)

(312,739

)

Net loss attributable to controlling interests

(1,310,381

)

(1,463,191

)

(5,232,325

)

(6,307,282

)

Dividend to preferred shareholders

(186,595

)

—

(714,830

)

—

Net loss attributable to common shareholders

$

(1,496,976

)

$

(1,463,191

)

$

(5,947,155

)

$

(6,307,282

)

Net loss per common share, basic and diluted, attributable to common
shareholders

$

(0.01

)

$

(0.01

)

$

(0.06

)

$

(0.06

)

Weighted average shares used in computation, basic and diluted,
attributable to common shareholders

108,052,067

107,202,145

107,635,565

107,426,871

* Sales, net and Cost of sales include excise taxes of $1,520,204 and
$1,390,658 for the three months ended March 31, 2012 and 2011,
respectively, and $5,460,754 and $4,913,168 for the twelve months ended
March 31, 2012 and 2011, respectively.